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Stocks Rise With Advancing Metals

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November 21, 2016

By Riva Gold and Akane Otani

U.S. stocks rose with commodity prices Monday, putting the S&P 500 and Nasdaq Composite on track for fresh closing records.

Stocks have rallied since the presidential election, with major indexes advancing two weeks in a row through Friday. Investors had poured into financials, health-care stocks and industrials on bets that President-elect Donald Trump would loosen regulation and boost infrastructure spending. At the same time, they've pulled back from Treasurysand stock-market bond proxies, which are less attractive to investors when interest rates rise.

While investors reversed some of those bets Monday, with utilities among the biggest gainers in the S&P 500 and financials little changed around midday, all three indexes were poised to end the day higher.

"The market's been ripping since the election," said Bill Costello, portfolio manager at Westwood Holdings Group.

In commodities, oil prices led energy shares higher after Iraq's oil minister said the country would offer new proposals to cut output at next week's meeting of the Organization of the Petroleum Exporting Countries.

The Dow Jones Industrial Average rose 78 points, or 0.4%, to 18946, surpassing its closing record of 18923.06. The S&P 500 rose 0.7%, trading above its Aug. 15 record closing level of 2190.15. The Nasdaq Composite added 0.8%, passing its record close of 5339.52 reached on Sept. 22.

Metals prices rose, buffeted by a retreat in the dollar. Gold was up 0.3% at $1,212 an ounce and copper extended a multiweek rally following Chinese President Xi Jinping's statement over the weekend that his government would support a Free Trade Area of the Asia Pacific. Many investors expect this to mean increased imports by China, the world's largest metal consumer.

In government bond markets, the yield on the 10-year U.S. Treasury note fell to 2.329% from 2.337% on Friday. The 10-year note had posted its steepest two-week yield gain since 2001. Yields move inversely to prices.

"Our bond guys said the implementation of Trump's platform will result in stronger economic growth, stronger inflation, and the Fed will tighten rates," said Phil Orlando, chief equity market strategist at Federated Investors.

"When we saw that, we immediately increased our equity allocation and took it out of Treasurys," he said, favoring economically sensitive U.S. stocks such as financials and industrials instead.

In currency markets, the dollar paused after a 10-day rally, its longest winning streak in over four years. The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.3%.

The currency had tracked the bond market closely since the election, mostly rising alongside a decline in the price of the 10-year Treasury note. Fed funds futures tracked by CME Group point to a 95% chance of a rate increase next month -- a move that analysts say will make the dollar more attractive to investors.

"It's all about yield," said Simon Derrick, chief currency strategist at BNY Mellon.

Elsewhere,the Stoxx Europe 600 added 0.3%, following gains in Asia.

Investors in Europe were also watching the weekend's political developments in France and Germany. Nicolas Sarkozy's campaign to reclaim the French presidency ended abruptly after a surge of support for his former prime minister, leaving François Fillon and Bordeaux Mayor Alain Juppé set to advance to a runoff next Sunday.

German Chancellor Angela Merkel also said Sunday she would run for a fourth term next year, ending months of speculation.

Local politics have started to take a toll, strategists said. With the euro, "for the first time in quite a while, people are focusing on something other than pure-yield," Mr. Derrick said, adding "there's been a realization that political uncertainty is perhaps greater."

Italian 10-year bond yields rose to as high as 2.111% from 2.017% on Friday, ahead of a coming referendum on constitutional reform. They later pulled back toaround 2%, according to Tradeweb.

Earlier, the Nikkei Stock Average and the Shanghai Composite each added 0.8% to reach their highest closing levels since January.

Write to Riva Gold at riva.gold@wsj.com and Akane Otani at akane.otani@wsj.com